TIPS for BUYING A SHORT
SALE OR FORECLOSURE in MN, WI, or SD

Our market is flooded with properties that are in some
stage of the foreclosure process. While these properties can be a
fantastic deal, there are many special details that must be considered.
Here is a short over view. Call me anytime, and I'll go over your
personal situation with you. No Obligations.

BUYING SHORT SALE PROPERTIES

A short sale is a property that the owner is trying to
sell, but they owe more on their mortgage loan than the current market
value of the home. It may even be in the beginning stages of
foreclosure. The home is usually still occupied by the owner, but
contrary to popular belief, these homes are generally not some sort of
great bargain. Rather they are generally priced right for the current
market.

The process begins when the owner puts the house for
sale, and someone makes an offer to buy it. The owner will usually
accept the offer right away, but that is only half the process. The
owner must now present the offer to their bank, and basically beg their
mortgage company to let them off the hook by accepting less on the home
as full payment than they actually still owe.

WHY SHORT SALES TAKE SO LONG TO GET
APPROVED

The bank short sale approval process can take weeks, or
even months to give an answer.
Of course the bank can approve or reject the offer. The bulk of the time
it takes is because the bank isn't going to just automatically take a
big loss. They do many things before deciding, including checking out
the seller, and the sellers current financial situation. Are they really
in financial trouble, and can no longer afford the home? Are the
just trying to move, but can afford the home?

The bank also checks out the offer price to see if that
is the current fair market value, and to see if there is any suspicious
attempts to defraud the bank.

Another snag that can come up is often there is not just
one bank that has to agree to the short sale price. There can be many
lien holders that must all agree to basically give up their interest in
the property. This includes 2nd mortgages, securitized asset holders
(Fannie Mae or Freddie Mac) and even private mortgage insurance
companies. Getting all those people to agree is very tricky and time
consuming.

Closing on time, or actually closing at all, is always
questionable. It’s a frustrating process in most cases, so you need to
be very flexible on move dates, and a lot of patience when making offers
on short sale properties. Those looking to close fast, or need a set
date should avoid looking at short-sales.

BUYING FORECLOSURES and BANK OWNED
PROPERTIES

Once a house has been foreclosed on, it is a much
simpler process. These are known as bank owned, or REO properties. There
is now only one owner (generally the bank) and all other liens against
the property have been wiped out. When making an offer on a true bank
owned foreclosure, you will usually get an answer on your offer in just
a few business days.

There
are many things to think about when buying a foreclosure. For instance,
how long has the house been sitting vacant? In most cases, it will be at
least six several months, sometimes a year or more. A Minnesota,
Wisconsin, and South Dakota winter can be very hard on a vacant house.
Many are not heated and the utilities have been shut off for a long
time. Beware of hidden condition issues.

People commonly talk about buying HUD HOMES. A HUD Home
simply means the homeowner who was foreclosed on had an
FHA loan. There is nothing special about a
HUD Home.

GETTING A LOAN ON FORECLOSED HOMES

The next concern is you getting a loan on the foreclosed
home. Generally speaking, the home needs to be habitable at the time of
closing. This means you could move in right away, and safely live there.
Water, heat, bathrooms, and kitchens all need to be working, and there
are no major health or safety issues.

If the home needs significant repair, there are few
options. One of them is the FHA 203k program.
This program DOES allow you to purchase the home and get the
funds needed to fix it all in one new loan. This sounds great, and it
is, but you are NOT allowed to do any other work yourself. It must
all be done by licensed contractors. Call us to discuss the finer
details of how FHA 203k loans work.